JK Cement (JKCE) in a conference call has announced its plans to invest ?6 billion in the business of decorative paints over the span of next five years focussed in the North and Central markets. JKCE aims to start with an initial capacity of 60,000 kilo litres in Uttar Pradesh by April 2024.
The company is planning to spend ?3 billion on the plant and equipment. The remaining balance will be put into branding, working capital and funding losses in the initial years. The yearly out go in the paints business has been planned to be capped at 8-10 per cent of EBITDA of the existing business. Subsequent investments will be funded via internal accruals of the paints business and will be funded through a mix of equity and preference share capital without raising any debt at the paint subsidiary level.
JKCE has set the target revenue as ?1-1.5 billion in the first year (FY25) and has projected it to grow at the same rate each year, with ?7-8 billion revenues on full utilisation of initial capacity. The core cement business will continue to be the focus area, and a de-merging of the paint business may be considered and listed separately once it achieves a sizeable scale. JKCE management mentions that ?the paints business is an extension of its putty business as it shares a common retail channel and influencers. JKCE sells putty via over 60,000 dealers (one-third in the North and UP markets), of which 70 per cent are paint outlets and 30 per cent are hardware stores.?